South Korea's growing isolationSouth Korea is becoming increasingly marginalized in Northeast Asian policymaking because of the collapse of inter-Korean talks and its growing estrangement from the United States, Japan and China.
Washington and Tokyo have regained the initiative and will be able to push a harder line against Pyongyang, while Seoul's engagement policy faces dwindling domestic support. The deterioration of relations with Washington is fueling rumors of additional drawdowns in US troop levels, which could cause public and market trepidation over a perceived degradation in Washington's commitment to South Korea's defense.
Chinese and Russian acquiescence to stronger language in United Nations Resolution 1695 than first indicated left South Korea nearly as isolated as Pyongyang. Seoul had expected China and Russia to toe the line against US and Japanese advocacy for restrictions on North Korea's missile and nuclear programs.
The revelation that the Bank of China froze North Korean assets in 2005 to combat Pyongyang's counterfeiting and money-laundering activities contrasts sharply with Seoul's intransigence against criticizing North Korea's illicit activities. South Korean legislator Park Jin, citing US government sources, revealed on July 24 that the Bank of China had frozen North Korean accounts last year in response to pressure by the administration of US President George W Bush.
The US had identified last September eight North Korean firms engaged in proliferating weapons of mass destruction (WMD) and three Chinese banks, including the Bank of China - the country's second-largest state-owned financial institution - as under investigation for money-laundering North Korean illicit activities. The Macau-based Banco Delta Asia's ensuing freeze on North Korean assets was well publicized at the time, but the Bank of China's action was not known until the South Korean disclosure. Had the bank not taken action, it could have faced US retribution. The Proliferation Security Initiative and the Patriot Act allow the US Treasury to seize US-based assets if a foreign company or bank is determined to be involved in WMD trade or money-laundering.
China's acquiescence to US requests for action against North Korea's illegal activities, even as it publicly criticized Washington's efforts as counterproductive to resolving the six-party talks, reflects Beijing's conflicted policy toward North Korea. China seeks to induce Pyongyang to abandon its nuclear-weapons programs, but has been reticent to risk actions that could trigger escalatory North Korean behavior or regime instability.
China will continue to resist expansive US and Japanese economic sanctions against North Korea, asserting that UN Resolution 1695 applies only to missile and nuclear-weapons activities and does not provide for levying or enforcing sanctions. China will be more willing to constrain North Korean proliferation or illicit activities than in the past, but will likely limit its involvement to targeted action against specific entities in response to direct US requests.
The US and Japan have regained the upper hand in policy toward North Korea and will use the UN resolution to leverage additional nations to adopt stronger policies against Pyongyang. The US and Japan will implement additional punitive measures against North Korea, but likely have not yet determined their final form, pending internal deliberations and discussions with allies.
US assistant secretary of state Christopher Hill was deliberately vague in congressional testimony on July 20, merely alluding to a "new package of economic and other sanctions". Stuart Levey, the under secretary of the Treasury for terrorism and financial intelligence, discussed potential options with Asian counterparts in mid-July. The US will likely pass the North Korea Non-proliferation Act this month and may reimpose sanctions that were lifted in 1999 as a reward to Pyongyang for its announced missile-launch moratorium.
Japan is still considering a range of sanctions, including additional restrictions on trade as well as amending the Foreign Exchange and Foreign Trade Law, to allow greater monitoring of the export of items that could be diverted to WMD or missile programs. Stronger Japanese legislation, including sanctions against foreign firms abetting North Korean illicit activities, may wait until the legislature's fall session. North Korea's growing isolation will exacerbate famine conditions and could trigger follow-on missile or nuclear tests.
The collapse of the July 11-13 inter-Korean ministerial meeting and Pyongyang's cancellation of resumed North-South rail service in May will constrain South Korean President Roh Moo-hyun's ability to push the engagement policy or facilitate a resumption of six-party talks. Seoul's uncharacteristic resolve during the ministerial meetings caused the North Korean delegation to storm out. Unification Minister Lee Jong-seok pledged that South Korea would freeze humanitarian aid until Pyongyang returned to the six-party talks.
However, Seoul will likely reverse its vow to avert a potentially destabilizing food crisis. The Roh administration has frequently lowered the bar for North Korean compliance and maintained deliveries during previous provocations. Seoul provided 500,000 tonnes of food and 350,000 tonnes of fertilizer in 2005 and was expected to provide similar levels this year.
Recent monsoons have devastated North Korea's harvest, greatly increasing the risk of starvation, heightened malnutrition and outbreaks of diseases. North Korean official media report that flooding and landslide conditions are the worst since the early 1990s, having inflicted "tremendous" economic loss and hundreds of deaths. Non-government organizations (NGOs) with access to North Korean sources report that outbreaks of typhoid, paratyphoid, whooping cough and other diseases have already occurred in at least three provinces. A significant portion of the North Korean population is severely malnourished, increasing its susceptibility to starvation and associated diseases. It is estimated that during 1995-97 about 1 million to 2 million North Koreans died of starvation and starvation-related diseases out of an overall population of 23 million.
Despite anger over North Korea's missile tests, South Korea and China will likely augment their food deliveries to prevent a dangerous deterioration in North Korean conditions, but would delay an announcement until later this year. Both countries are fearful that a collapse of Kim Jong-il's regime would have devastating economic repercussions and unleash a flood of refugees and loss of control of North Korea's nuclear programs. Seoul's policy reversal will further strain relations with Washington, as would any US attempt to use the food situation to pressure Pyongyang.
Seoul and Beijing would likely rebuff any US entreaties to use the food crisis to increase international pressure on North Korea. Although the US has publicly declared that humanitarian aid is provided without preconditions, it has in the past privately linked donations to achieving North Korean policy objectives. The Bush administration would see an opportunity to further isolate North Korea since Pyongyang has become increasingly reliant on South Korea and China, its two biggest food donors. Without foreign aid, North Korea faces an annual food shortfall of 1 million tonnes. The World Food Program, the conduit for all other international aid, was forced to decrease its aid deliveries significantly after international donations declined by 50% since 2002 due to donor fatigue, competing requirements, and Pyongyang's intransigence over its nuclear program.
North Korea will reject the World Food Program's offer for increased aid, since it remains contingent on stringent monitoring measures to prevent diversion from intended recipients. Pyongyang was able to use increased Chinese and South Korean donations to reduce its reliance on international donations and force NGOs to reduce their presence in the country, decreasing the ability of the US to use donations as a bargaining chip.
Roh would face strong opposition to grander proposals, however, such as his May 9 pre-launch offer of massive amounts of unconditional aid. But he will not be deterred from continuing foreign-policy initiatives to counter efforts by Washington and Tokyo to isolate and pressure the North. Roh and Lee have been stronger in their criticism of US and Japanese diplomatic responses to the North Korean missile test than to the launch itself.
Growing strains in Seoul's relationship with Washington, combined with South Korean demands for assumption of wartime command authority, could lead the Bush administration to announce further reductions in US ground troops in Korea, possibly as early as the October bilateral security consultative meeting.
The US is contemplating cuts below the already-reduced, 25,000-troop level announced for 2008, including a rumored total withdrawal of US ground forces by 2012. Defense Secretary Donald Rumsfeld and General Burwell Bell, commander of US Forces in Korea, have warned that the recent closure of the Maehyangri training range to US pilots could cause Washington to redeploy some of its military air units off-peninsula. Previous US announcements of troop reductions or redeployments triggered concern by Seoul over the impact on North Korean actions and investor drawdown in the South Korean economy.
Bruce Klingner is the Korea analyst for Eurasia Group, the world's largest political-risk consultancy. The views expressed herein are his own. His areas of expertise are national security, political, military and economic affairs in Korea, China and Japan. He can be reached at [email protected]